Econ 101 - 121115

Econ 101, A Case Study

            One of the hallmarks of liberal economic thought is the belief that politicians are able to suspend the laws of economics by enacting their grandiose thoughts about the “public good” into law.  Unfortunately for the do-gooders, individuals trying to make ends meet and business owners trying to make a profit tend not to voluntarily cooperate with the social engineers.

            Governor Mark Dayton advocated for, signed into law, and celebrated legislation providing a massive public subsidy to help the Minnesota Vikings build a new football stadium.  The legislation contains a provision that allows the Vikings to license various football related rights, including stadium seats.  The language in the bill can be understood by anyone who takes time to read it.

The Vikings’ ownership recently indicated the intent to license seats for season tickets, presumably as a way to recoup some or all of the team’s investment in the new stadium.  The Governor reacted by sending Zygi and Mark Wilf a sternly worded letter in which he points out that this is supposed to be the “People’s Stadium,” not the “Rich People’s Stadium.”  In other words, the Governor apparently expected the consummate entrepreneur to discontinue looking for ways to make money.  The Governor would like Mr. Wilf to forgo income opportunities for the public good, or middle class people, or the children, or something.  LOL!

            First of all, going to the stadium to watch an NFL game is already an activity engaged in primarily by the evil one-percenters.  Just for the fun of it, I did a little ticket shopping.  If you want lower level seats at the end zone line for the December 9 game against the Chicago Bears, it will set you back $186 a pop.  Let’s see . . . four tickets, $744.  Parking, $20.  Four Cokes and four hotdogs, $40.  Naïve governor, priceless!  “People’s stadium?”  Ya . . . sure.

            To be fair, you can buy less expensive tickets.  But I am really not interested in paying even $50 or $100 to crane my neck or see the action only when the teams are playing on “my end” of the field.

            Lest you think I am casting aspersions on the Vikings, let me be clear.  The Vikings have done nothing wrong.  The Wilfs own the rights to sell a product (NFL football games) that lots people want to buy.  And these consumers of football continue to pay, even when the price goes up dramatically.  Economists refer to this as an inelastic demand curve.  Inelastic demand curves are very good for sellers.  Mr. Wilf has every right to charge whatever price he can get for his product.  Am I willing to pay $186 for a football ticket?  Nope.  But that doesn’t matter.  Other people are willing.  The Vikings don’t need me.  Good for Mr. Wilf!

            By taking advantage of the seat licensing provision in the statue, the Vikings are engaged in smart business decision-making.  They are acting legally to maximize profits and minimize losses.  Despite the Governor’s expectations to the contrary, the Wilfs are in this thing to maximize profits.  It seems Governor Dayton believes the laws of economics should not apply here, because he doesn’t want them to apply.  In his mind the Wilfs should just sit back, write a check, and not attempt to recoup their costs or make higher profit margins.  Sorry Governor, that is not how the world works.

Post Mortem III - 121111

The Post Mortem

Part III

(See previous posts for Parts I and II)

            This is the final post in a three-part blog dealing with the 2012 Election results and what they tell us.

I.     Smash Mouth Politics (See November 8 blog post)

           

II.   Failure to Persuade Minority Voters (See November 10 blog post)

III. On the Government Dole

When we think about people receiving “a government check” we tend to envision stereotypical transfer payments such as welfare, food stamps, social security, and the like.  There is no doubt these programs are the largest contributors to our budget problems (current and forecasted).  And clearly people who are dependent upon these government programs have every incentive to vote for candidates that will continue the flow of other people’s money to them.  But the political problem is much broader than traditional transfer payment recipients.  In addition to those people directly receiving government transfers, there are millions of voters that depend upon government, either directly or indirectly, for their livelihoods.

As of March 2011, state and local governments employed 16.4 million full time equivalent workers.  In addition, there are approximately 2.2 million full time equivalents employed by the federal government.  So, more than 18.5 million American workers get a paycheck from the government.  There are approximately 135 million people employed in this country, which means nearly 1 out of 7 employees works for the government!

What does this mean?  It means that 14% of the electorate has a personal vested interest in the continued expenditure of government money, whether or not there is a rate of return on the expense.

In addition to government employees on the payroll, there are countless businessmen and women that receive large chunks of income from government.  Construction companies, engineering firms, architects, artists, musicians and countless other people make their “private sector” incomes from government contracts.  Once again, this is not a value judgment about the individual receiving the income; it is simply recognition of the fact that a large percentage of our population has no incentive to restrain government spending and borrowing because they benefit directly from its excesses.

Ah yes, and then we have Mitt Romney’s infamous 47%.  It is a fact that 47% of American "taxpayers" pay zero federal income tax.  Therefore, they have no incentive to oppose additional taxation, borrowing or spending.  They benefit from government services, but don’t pay anything toward them.  I am NOT casting aspersions on any of these folks.  They get up in the morning and go to work or collect a government check to which they are entitled under our current system.  This is not about character, ill will, or any such thing.  It is simply an acknowledgement of the fact that as a group, people within this demographic have no incentive to control government’s cost, or restrain its spending and borrowing.  So politicians win these voters by simply promising to spend more government (other people’s) money.

This is a very difficult problem to solve.  In order to reduce the number of people that receive their compensation from the government, we will have to reduce the role of government in our society.  Hopefully Americans will come to the conclusion we don’t want to become a welfare state, and will elect limited government conservatives to serve in public office.  There are many fair minded, reasonable Democrats who understand we cannot continue to grow government.  I hope these folks will put country ahead of political Party and join the cause.  And of course there are many Republican candidates and office holders that are not willing to take the political risks necessary to tell the truth and then vote accordingly.  We must hope they see the light.

Post Mortem II - 121110

The Post Mortem

Part II

(See previous post for Part I)

            This is the second post in a three-part blog dealing with the 2012 Election results and what they tell us.  Part III will publish tomorrow or Monday.

I.                    I.   Smash Mouth Politics (See November 8 blog post)

           

II.  Failure to Persuade Minority Voters

            Everybody intuitively knows that the percentage of non-white voters in America is increasing.  But I don’t think most people are aware of the degree to which this demographic shift is impacting elections.  When Ronald Reagan won his first presidential election in 1980, non-Hispanic whites made up 89% of the electorate.  By 1988 that number dropped to 85%.  In 2008, Barack Obama and John McCain faced an electorate made up of just 74% whites.  And in 2012 only 72% of those who cast ballots were white.  Demographers predict this trend will continue.

In the 2012 Election President Obama got over 65% of the Hispanic vote, and over 90% percent of the black vote!  As the minority population grows, it will be impossible for Republicans to compensate by getting higher and higher percentages of the white vote.  Eventually the math becomes overwhelming.  Republicans must do better among minority voters.  But here is the key: we must not pander, give up on our principles, or adopt the destructive policies of the left.  Rather, we must win the argument with all voters.

            Liberal economic and social policies have decimated minorities, blacks in particular.  The welfare state has replaced fathers in the household, which has had a devastating impact, especially upon children of minority parents.  In 1960, 80% of black children lived in two-parent households.  Today less than 50% of black children live with both parents!  Why does that matter?  This quote from the National Poverty Center says it all: “Poverty rates are highest for families headed by single women, particularly if they are black or Hispanic. In 2010, 31.6 percent of households headed by single women were poor, while 15.8 percent of households headed by single men and 6.2 percent of married-couple households lived in poverty.” 

The welfare state subsidizes single parentage, out of wedlock pregnancy, and paternal irresponsibility.  And like it or not, the old adage is true: That which you tax you get less of; that which you subsidize you get more of.  Lyndon Johnson’s Great Society ramped up the “subsidy” for destructive behavior within the family, and we now have a lot more destructive behavior.

So, what are the implications?  The data clearly demonstrate that an increasing number of single parent households leads to higher rates of poverty, teen pregnancy among girls and juvenile delinquency among boys.  And all of these problems have hit minorities harder than whites.  Conservatives want to reduce government dependency.  Liberals want to double down.

            If conservatives are to win in the marketplace of ideas, we must find a way to convince ALL people that a job is preferable to welfare or unemployment benefits; independence is preferable to dependence upon government; the nuclear family matters; and, the American Dream is for everyone.  It will be an uphill battle.  It is much easier to make the liberal argument: “You have a need, here’s some money.”  But it is an argument we must win if we are to avoid becoming an entitlement society that crumbles under its own weight.  At the time of this writing the National Debt is $16,251,827,000,000 and counting.

(Check in for Part III of this series tomorrow or Monday)

Post Mortem I - 121108

The Post Mortem

Part I

            Republicans were soundly defeated around the entire country on November 6th.  In my home state of Minnesota, Republicans lost control of both the House and the Senate.

            President Barack Obama and Governor Mitt Romney offered the people a clear choice.  The President is an unabashed statist [1] who believes private markets should be strictly regulated and operate at the pleasure of the state.  Governor Romney is an advocate for capitalism, and believes in free markets that should be only minimally regulated to protect against abuses and market failure.  The American people chose Obama’s vision.

            Minnesotans replaced a Republican legislative majority with Democrats that will almost certainly go along with far left Governor Mark Dayton to raise taxes, expand regulation, and grow government dramatically.

            Applying Occam’s razor, there is only one logical conclusion to be drawn from the 2012 Election: Americans are very liberal, if not leftist.  But wait just a minute . . . the data do not support this “obvious” conclusion.

            The most recent Gallup Poll (2011) reports that 40% of Americans identify themselves as conservative, 35% moderate, and only 21% liberal.  And when it comes to pocket book issues, the results are even more dramatic.  Gallup reports that 46% of Americans identify themselves as economically conservative, as opposed to only 20% who identify themselves as economically liberal.  So given these data, how did a far left president get re-elected in the midst of economic malaise?  I believe three factors loom large, and will discuss them in three blog posts, this being the first.

I.  Smash Mouth Politics

            Liberals view politics as a street fight.  Conservatives tend to think of the political arena as the Oxford Union Debating Society.  As a result, Republicans set about winning arguments; Democrats set about winning elections.  Conservatives need to understand that in the short run there is no way to persuade people in large enough numbers to overcome busloads of union members, college students, and elderly Americans getting a free ride to the polls with instructions to vote Democrat.

In 2008 there was extraordinary turnout for then Senator Barack Obama, especially among young people.  This was attributed to the star power of Obama combined with the first opportunity to vote for a viable black presidential candidate.  Many election analysts such as Michael Barone, Karl Rove and Dick Morris believed this was a phenomenon that would not be repeated in 2012.  2008 was supposed to be an anomaly.  The prognosticators were dead wrong.  Although the euphoric excitement over President Obama seemed to wane during his four years in office, Obama’s voters were back out in droves (relative to Republicans) on November 6th.  How do you explain this?  Democrats seemed to lack passion, and passion is supposed to drive turnout.

Well, the fact is Democrats have learned how to drive turnout.  They are able to accurately ID hardcore Democrats and get them to the polls.  But even more importantly, they add millions of voters every election cycle by hauling folks out to vote who may or may not even care about political issues or candidates.  Many conservatives (including me) tend to view this tactic as tainted at best, and corruption of the process at worst.  But . . . if we want to win elections, we will have to get over it and do whatever is necessary to get people out, so long as we do not violate election laws.  Voting is a numbers game.  You have to get people out that will vote your way, whether or not they do so out of conviction.

If Republicans are going to win elections, we will have to indentify individuals and groups that will vote Republican, register them, and get them out to vote.  If I were a candidate for governor or president, I would immediately find someone to build a top-notch get-out-the-vote machine.  A Republican candidate may be correct on every issue, win every debate, and lead by five points in the polls, but if he/she doesn’t get people out on Election Day, a concession speech better be in the hopper.

(Part II of this series will publish tomorrow)

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[1] Statism - the principle or policy of concentrating extensive economic, political, and related controls in the state at the cost of individual liberty.

Decision Day 121105

Decision Day

The Iowa Caucuses are now ten months in the rear view mirror.  It is over nine months since Minnesotans caucused.  Election Day has arrived.  Campaign commercials and polls are about to morph into election results, concession speeches and euphoric victory celebrations.

When talking politics, the “water cooler” buzz tends to revolve around the presidential race and the occasional interesting U.S. House or Senate race.  But on this Election eve I’d like to share a little bit about the State Legislature.

Politicians, pundits and ink-stained wretches have a way of getting caught up in policy minutia and details.  But when we go to the polls we have a binary choice (except in the rare case when a 3rd party candidate is viable).  And the choice is as follows: vote for the person who believes in economic freedom, liberty and limited government; or, vote for the person who believes that such a system produces inequities that require wealth redistribution, micromanagement of people’s affairs and large government bureaucracies.

I spent the last two years in the Minnesota Senate fighting for economic liberty and freedom from oppressive government.  Governor Mark Dayton and his DFL allies have a very different view.  They are fundamentally suspicious of the free market system and believe government must routinely intervene to prevent outcomes that don’t suit them for one reason or another.  This is not the political philosophy that has guided America to greatness.  We have built the greatest economic engine known to man by allowing individuals to work hard and benefit from the fruits of their labors.  This approach works for individual states as well as the country as a whole.

Wisconsin, Indiana, and other states have chosen the path of limited government and reliance on free markets.  They have reduced taxes, streamlined the bureaucracy, and lessened the influence of powerful interest groups.  These states are seeing the results.  Their economies are growing, employment is increasing, and businesses are starting and prospering.  Conversely, Illinois, California and other big government states are spending irresponsibly, running up big projected deficits, stifling economic growth.  Unemployment remains high, and pressure is put on social programs.

Governor Dayton and his DFL allies want to take us the way of the big government states.  A Republican legislature is the only firewall between you and a bigger government Minnesota that will not serve you or your children well.  I have worked on many campaigns during this election cycle, and have watched my colleagues work from dawn to dusk.  We have done all we can do.  Now it is up to you.